Social Phases Of Production And Consumption Of Wealth

( Originally Published 1915 )

PERHAPS no other phase of social life shows so plainly the interdependence of individuals as does the production of wealth. Considered in its specific sense it belongs to political economy, but as a general social function it belongs to sociology. Here we need consider only the social phase of man's economic activities and the sociological bases of a theory of economics.

There are two great primal desires, the desire for food and the sex impulse, the one purely egoistic, the other a social craving. It s hard to say which of these is predominant. Some-times the desire for food has checked the sex impulse. But on the whole it is doubtful whether, except in extreme instances, either one has permanently controlled the other. In fact, until society reaches a rather advanced stage in development reproduction goes on even though it means the gradual lowering of the standard of living, as in China. So important, however, do the economic motives based upon a later desire for wealth and the social prestige become in our modern, highly complex civilization that there are those who believe that the economic life underlies all other social relations.' In the past the economic motives have played much greater part than they are likely to play in the future? Looking only at present-day society in our Western world, it often seems that the economic life under-lying all other phases of social life represents the formal bass of society. As such it manifested itself to a degree in the beginnings of society and played an important part during its growth and development. Our best education, our religion and aesthetic culture, as well as all our moral relationships, depend to a great extent upon the development of the economic life  upon the industry that creates the goods for our material welfare. The evolution of our economic life touches indirectly all the social activities. This, however, is only one aspect of the matter ; social customs and fashions in turn determine our economic development.

Economic Goods or Wealth produced to satisfy Desires.  There are material wants, the desire to satisfy which causes man to struggle perpetually. To satisfy hunger, to secure protection from cold, to satisfy artistic taste, to add to the conveniences of life, men are striving from the cradle to the grave, and the satisfaction of these desires s the immediate aim of the social group. The creation of wealth is one of the great activities of society. Wealth is formed by the creation of utilities, for man cannot create anything new, but he can transform useless material into useful articles.

The tree in the forest as it stands may be of little use, but transformed into furniture or houses it may satisfy desires. The mineral in the mountains in its native form may not minister to man's needs, but brought to the surface and transformed into instruments for man's use, it may supply many of our greatest wants and therefore become useful and desirable. While the mineral and tree untouched by the hand of man are wealth, yet they are so because of their prospective utility through transformation into things of beauty or use.

Slow Accumulation of Wealth.  The creation of wealth by primitive man was, in the beginning, a slow process. At first it took all his time to obtain sufficient food to perpetuate life, and clothing and shelter to protect him from the rigor of the climate. At times both food and shelter were insufficient to preserve life. The accumulation of wealth began with a surplus of food, clothing, implements, and ornaments. The increased food supply enabled individuals and tribes to spend more time in making a higher grade of implements, better homes, and enlarged the opportunity for the creation of wealth.

Wealth at any stage is measured more by power of production than by creation of permanent goods. Indeed, what is frequently called the accumulation of wealth is a multiplication of resources and a development of power and opportunity for the creation of wealth, rather than a massing of economic goods. For it will be observed that a large proportion of what is called wealth has been created within recent years. Not until the discovery and use of the precious metals was the hoarding of wealth or its preservation for future generations possible to any large extent. But the power to accumulate, once well started, tends to increase in a geometrical ratio. This power when rightly used is a measure of material progress.

Complex Nature of Social Production.  In early times economic society was very simple and each individual, seeking his own welfare, survived or pershed according to his efforts and opportunities or lack of them. But as common interests became apparent, small groups struggled together and worked for one another. Following this, the division of labor began, some procuring food and others cooking it, others building the home, others making garments, and still others making utensils. Later, trading was conducted by other groups and, finally, transportation by others. Thus, with the increase of work and wealth, society gradually became differentiated and resolved into groups working for definite purposes, the service of each group being necessary to the whole society.

The final social effect was to bring those who had similar or nearly related occupations into closer contact and to develop social relationships between groups. To-day people are arranged in social groups largely on account of their occupations. It s more natural for those in the same trade, whose business relationships are intimate, to associate, than for those who are widely separated, hence the basis of group formation to-day is industrial action. There are those engaged in the same occupation, however, who are widely separated, so that the economic classification does not always agree with the general social grouping. Some wage earners of one community, for instance, have less social contact with those of other communities than they have with merchants of the communities in which they live. Yet, in the same locality intimate social relationships usually follow business contact.

This point of view is essential to the study of the so-called class problem in the United States. The banker may have no enmity toward the laborer or distrust of him, nor does he refrain from association with him on an assumption of superiority, but because of the natural social classification that appears from following different vocations. In general, men choose their associates in accordance with their economic relationships. And as wealth increases society becomes more or less stratified in accordance with the amount of wealth. The best examples of this tendency are found in fashionable society where individuals vie with one another in show of lavish expenditure.

Social versus Individual Wealth.  An important social feature of wealth production is observed in the difference between the aggregate of social wealth and individual holdings of wealth. The wealth of a community is found by adding to the public wealth the sum total of individual wealth. But in estimating social wealth care must be taken to exclude bonded indebtedness, and in the estimating of individual wealth credits must offset debits in such a way as to show the real wealth. Thus the promissory note is real wealth to the individual who holds it, but its existence does not increase the wealth of the community. The social inference from these facts is that the sum total of the wealth of a community may be an estimate of power, but the distribution of individual wealth is an estimate of social well-being. If, for instance, the wealth is in the hands of a few people and the remainder are struggling with oppressive mortgages, extortionate prices, or general poverty, the social character of the community is lowered.

Importance of Well-Being.  The communities that are the most progressive are those that secure the most economic justice between individuals. Indeed, social well-being cannot exist when individual economic well-being is lacking. Hence a community that has moderate wealth that is broadly distributed and widely used is far better than one of far greater wealth, in which multitudes receive little benefit of wealth, either from possession or use.

Social well-being, then, so essential to progress, should involve an element of justice to all the individuals of a community. It involves an ethical as well as an economic element. The question of how wealth is obtained is more important than the bare fact of attainment. Those nations that have grown wealthy by plunder fare worse in the long run than those that grow wealthy by honest industry. Thus, the Roman nation declined in proportion as it discouraged home labor and lived on wealth obtained by conquest. Likewise, Spain destroyed her own industries and her prosperity when she attempted to live by plundering others. Further, a nation may have earned its wealth by honest labor, but the estimate of its progress will only be determined fully by the extent to which this wealth is made to administer to the well-being of all. Hence it is, that in considering wealth-getting, one of the greatest of social or individual activities, one must also consider weighty questions of methods of production, distribution, and use, before making a final estimate of social well-being.

Land or Nature as a Basis of Social Action.'  In the consideration of wealth, land or nature s the first element to be considered. Not only its agricultural and mineral resources are to be considered, but also its extent. Room for work involves the relation of the population to the land, and social progress will be limited by the production of the soil, for it some-times determines the size of population that may be supported. There has always been land enough for the population of the earth, but owing to its distribution, many districts at different periods of the world's history for the time being have been congested or overpopulated. While a sparse population is not capable of a high grade of social life, a very dense population may lead to social degeneration.

Theory of Malthus.  Malthus, observing the possibility of the rapid increase in population and the comparatively slow increase of the means of subsistence, asserted that unless there were checks on population, population would outrun the food supply and many would perish. He held that population tended to increase in geometrical progression and the best to be hoped for as regards food supply is arithmetical increase, hence, as a mathematical problem, population has a tendency to overtake the food supply. While the general statement is true, Malthus failed to give sufficient weight to certain compensatory conditions, such as intensive agriculture, which constantly increases the food supply per acre ; the introduction of diversity of food products, which increases the power of nature to supply wants ; the better preparation of food, which gives it greater power to support life ; the temperate habits of the people ; and, more than all, the enormous amount of productive lands to be brought increasingly under cultivation. He confined his discussion to the natural checks, vice and misery, and to the prudential checks, such as late marriage and small families, which would tend to keep the population within the limitation of the food supply.

Several considerations have been urged against Malthus's conclusions. While individuals have starved for want of food, and whole communities have suffered depletion for the same cause, the world at large has plenty of food, and there seems to be no probability within the range of human prophecy that it will be exhausted. It may be conceived that a condition will be reached when all land will be put to its most productive use, and population cease to increase from lack of food supply ; and while such a state is, in point of fact, too remote for immediate consideration, yet such a possibility must be faced by the sociologist. So long as man continues to tap in new places the almost inexhaustible supply of nature's resources, the normal increase of population will receive sufficient support ; yet, when invention ceases to keep ahead of human needs, as in China, the Malthusian law operates. Nor did Malthus at first foresee the modern tendency to restrict the size of the family discussed in a previous chapter. He assumed that the sex impulse would demand satisfaction either in normal or irregular relations. In the former case there would be an increase in population in a geometrical progression ; in the latter population would be checked by vice. He did not make sufficient allowance for a check on population within normal family relations. This defect he corrected in later editions of his Essay.

Nevertheless, after all these optimistic considerations have been given due weight, it remains to be shown that the general conclusions at which Malthus arrived no longer are true fundamentally, and that we can afford to ignore the warning they bring to humanity. While our ever present poverty is due often to social maladjustments which are socially remediable, at bottom poverty goes down to the pressure of population upon food supply, and with every increase in the population of a country whose other economic factors remain the same, the pressure of population on food supply is bound to increase.

Labor as a Means of Wealth Production.  Other things being equal, the productivity of a community will be determined by its labor power. It will be determined first and foremost by its organization, then by the quantity of labor, that is, the number of laborers available, and still more by the quality of the labor force. Wherever there is a large body of laborers there is an opportunity for the creation of wealth such as does not exist in a sparse population. But the more essential elements are the strength, ability, zeal, happiness, intelligence, and physical condition of the laborers. A laboring population that is full of hope, thrift, happiness, and honesty will accomplish a vast deal more than degraded slave labor driven by the lash.

Again, the amount accomplished will depend upon the division of labor, for each laborer learning one thing well becomes more skilled and saves time and energy. The total laboring community thus becomes more proficient. In addition to this the power of directing labor, the organization of workmen, and the organization of business contribute greatly to productive power. All these conditions affecting the productivity of labor are in turn affected by social institutions, such as human organizations in the form of governments to secure peace, voluntary organization to direct in the most efficient manner, to organize capital, labor, and land in the productive process.

Social Effects of the Organization of Industry.  The social results of the division of labor and the organization of industry are to make people more dependent upon one another. If many groups of laborers are employed in making a sewing machine, a hat, or a coat, none of these articles can be created if any one of these respective groups fails to do its part. If forty men are employed to make a single boot, or twenty-three persons are engaged in making a single shirt, the work-cannot go on if one workman drops out, unless his place can be filled. He is a cog in a complicated piece of machinery. Hence, in larger groups of society, each group is dependent upon other groups, each industry upon other industries. The system makes all members of society interdependent and makes the success of the whole depend upon the harmonious working of individuals in groups.

Service of Capital in the Production of Wealth.  Capital represents surplus wealth set aside for productive use. It originates from saving or refraining from consuming in a certain way, in order that what is produced may be used in production. By means of capital the production of wealth is increased a hundredfold. The bare labor of hands and brain without capital, that is, without tools, machinery, and money, or free capital, can yield but little more than bare subsistence, while with the use of capital wealth may accumulate rapidly. By the proper combination of labor, capital, and directive energy more wealth of some kinds may be created in an hour than formerly in a year under other conditions.

Coincident with the use of great amounts of capital in the industrial life of the world are certain important social effects. The factory system with its class division between employers and employed, wage earners and entrepreneurs and capitalists, the class consciousness and class feeling which give us our labor problem, is one of the outcomes of the capitalistic rιgime. Certain political effects have come also in the train of great aggregations of capital. Legislators are bought, courts sometimes corrupted, and the rich sometimes have held the reins of government to their own advantage. A new aristocracy built upon wealth has often risen to displace the old aristocracies of blood and culture.

On the other hand, with this same capitalistic rιgime, there has come such an increase of public wealth that never as now has public education, free to the poor as well as to the rich, been supplied with such prodigal generosity. Perhaps more of the population of the countries industrially organized on the capitalistic basis are living in conditions of comfort than in the other countries of the world. Step by step the wealth of these countries is being socialized for the benefit of the whole population. Gradually social injustice is being corrected, conditions of labor improved, poverty prevented, and right living conditions secured.

Sociological Effects of Changes in Processes of Social Production.  A finished product seldom reaches the market that is not the result of the combined industry of many hands and the work of many agencies. As new forces are brought into use, there is a constant changing and development of industries and consequently of industrial life. When the transition of hand manufacture to power manufacture occurred in the last half of the eighteenth century, the entire composition of society was altered. It then began to arrange itself into industrial classes.

This social evolution has continued with accelerated force to the present time. The introduction of machinery, the development of new appliances of steam and electricity, the invention of new methods of business, cause a constant shifting of society from one form to another, and create changes in relation-ships. Amid these shiftings it is difficult to secure industrial liberty and industrial justice. Progress here, as elsewhere, is made at a considerable cost to individuals and frequently to groups.

Sociological Causes of Changes in Economic Processes.  On the other hand, it is no less true that social changes are followed by great revolutions in methods of industrial production. For example, the Industrial Revolution in England was not only a cause of social changes ; it was itself dependent on great changes in population and in social ideals. The old customary relations were breaking down ; the guilds were gone. The Napoleonic wars were giving England control of the seas, and through cutting off the supply of grain from the Continent and other sources, had resulted in higher rents and increased inclosures through increased demands for grain. Moreover, these wars caused a demand on the Continent for English manufactured products which could not be supplied by the old methods. Under a stable government capital increased, lending and borrowing were so regulated that the entrepreneur could profit. Thus, a premium was put upon enterprise. Large bodies of raw materials were made available to British industry through Britain's wide-extended merchant marine, connecting her with her colonies. The old methods of manufacturing and distributing England's goods were not adequate to meet the demands of the new and changed times which had come. Says Cheney, " And these antiquated methods of manufacture and transportation were all the more at variance with the needs and possibilities of the time because there had been, as already pointed out, a steady accumulation of capital, and much of it was not remuneratively employed. The time had certainly come for some improvement in the methods of manufacture."

Struggle of Classes.  While in the United States there are no classes based on noble blood and none at all as distinct as those of Europe at the close of the Middle Ages and the early modern period, yet as a result of the occupational division of labor, people have been arranged into strata more or less permanent. There is the capitalist and entrepreneur class on the one side and the laboring class on the other. The laboring dass is further subdivided into the skilled and the unskilled work-men. However, it is still possible, on account of the opportunities offered, for the individual to pass from one group to an-other and from the conditions of poverty to a condition of wealth. The common laborer of to-day may pass to the rank of capitalist and manager of business to-morrow. The forms of social stratification may continue, but the individuals who compose the groups are constantly shifting in their relationships. Those who actually do pass from one class to the other are growing constantly less, relatively, in number. With the growth of industrial classes there is an increasing solidification of the groups and less opportunity to move from one to the other. While this industrial liberty and freedom is increasingly limited by lack of opportunity, still the so-called struggle of classes leaves the exceptional individual his freedom. Whether this will continue after labor has been completely organized and industry is entirely managed by great corporate concerns will depend upon the harmony of the parts of society in a common cause, and upon the regulation of laws securing industrial liberty to the individual. For the perfection of the social machinery the well-being of all classes must be considered. Social justice must be manifest in the economic as well as the political world.

Social Consumption.  Production has been much more thoroughly socialized than the consumption of goods, although much still remains to be done to make the productive processes, especially in so far as human relations are involved in them, such as will contribute as largely as possible to the welfare of all classes engaged in industry. The social aspects of the consumption of goods, however, have received very little attention. In fact, there prevail many erroneous opinions concerning the proper use of economic goods. It is still quite widely held that consumption of goods which gives work to Labor or employment to Capital must be commendable, no matter whether the use of the goods makes for human betterment or otherwise. " Conspicuous waste " and " conspicuous leisure " are still approved in theory even by most of those who enjoy the privilege of neither.

The desires of individuals are the motors of progress. The production of material goods will cease when the desire for consumption fails. While the act of production logically precedes that of consumption, the unsatisfied desire for the latter is the real cause of the former. For the subjective desire of man is the real foundation of economic activity. So important is this phase of social life that the progress of the human race might be estimated by the number, variety, and intensity of desires. The full determination of this progress will not be reached until the extent of the satisfaction of these desires is measured. For, as Ward says, " Not only does civilization rest upon a material basis in the sense that it consists in the utilization of the materials and forces of nature, but the efficiency of the human race depends absolutely upon food, clothing, shelter, fuel, leisure, and liberty."' But the index of this efficiency is subjective, for it is only in the satisfaction of desires that man will put forth the effort necessary for the attainment of the objects that make efficiency possible.

It must not be forgotten, however, that the desires which move men to activity even to economic activity  are not economic alone in their nature. The economic motives are very much strengthened and supplemented by other social desires. The desires for art, religion, approbation, liberty, justice, and social standing, and so forth, excite individual and social activity and establish social relations. If we compare a natural with a civilized race, the variety and character of the desires will in the latter make a striking contrast with the few simple desires of the former. As a race progresses the gradual changing of old desires and the creation of new desires will mark the evolution of society. It is because of this evolution of desire that the ideals of society constantly change. The end-less attempt to approximate these receding ideals is only continued by a tremendous increase of individual and social effort.

Economy of Consumption.  In considering the well-being of society, the consumption of material goods is of great moment. Granting that the ideal is correct, and that the desires are cultivated and rational, the art of consumption is difficult to acquire. Few people know how to obtain the highest utility from material goods. The economy of consumption is usually deficient in individuals as well as in the community at large. How many material goods are wasted through imperfect consumption ! Individuals are made bankrupt and society enervated through failure to utilize what is already possessed. How evident this is among the poor and ignorant ! Thousands lose money, even to the slavery of poverty, because they do not understand and practice the art of economy. Leisure and independence might be theirs if they could utilize even what they have. This principle could be applied to society to show how public funds are wasted, and the community oppressed thereby, or to show how the lack of economy of social forces creates an imperfect social life and a waste of energy. Society at best is a very inefficient consumer of material goods. Social consumption lags far be-hind social production. The standard of life should be raised instead of lowered, and the rational desires should be multi-plied. But useless expenditure, which brings no permanent improvement, and injurious expenditure, which deteriorates the individual or society, should be eliminated. Excessive food for the body, intoxicating beverages or certain drugs and narcotics are examples of waste and injury.

These things are mentioned here only to point the social observation that consumption, like production, is the result of social motives. It is subject to social control, therefore, and depends on social ideals. The present wasteful consumption of goods is due in large measure to certain social results desired, such as prestige, and the envy and emulation of one's fellows. On the other hand, such consumption has certain social consequences which do not contribute to social well-being. Standards are set which some cannot reach, social classes are formed which cut through our population and tend to destroy democracy.. Often the advantages derived from the social striving thereby engendered are more than counterblanced by the destruction of that sense of social solidarity which is the foundation of social cooperation.

Luxury. Wasteful consumption, however, does not characterize only the poorer classes. The rich are as wasteful and unsocialized in their consumption as the poor. " Conspicuous
waste " for the purpose of increasing other people's estimate of one's social status is a principle common to both. Luxury is a relative term as applied to individuals of a community or to communities of different periods of time. What may be considered a luxury to one individual may be a necessity to another, and what is a luxury to one age may be requisite to the normal life of another. Yet society is very imperfect in its coordination when one part suffers for necessaries and another is engaging in lavish expenditure. There must be a social waste when, in the shadow of extravagant dinners, balls, and riotous living, a large part of the community is suffering for the comforts of life, some even to starvation, and are deprived of normal chances for individual or social development. Under such conditions it is idle to urge that lavish expenditure increases a demand for goods and furnishes occupation for many. The ravages of pestilence, fire, and wasteful consumption are in the same economic and social category so far as their destructive effect on society is concerned. The consumption of wealth and the exercise of power must yield a result proportionate to the sacrifice, in order to conserve the interests of society.

It can be easily demonstrated that the use of some things is wasteful as compared with the use of other things. For example, let us suppose that a certain person in order to display his wealth and thus increase his social prestige decides to give a ball. He decides that he will spend, let us say, $100,000 on flowers. The florists will get the $100,000. Part of that amount will remain with the florists as profits. A part will go to the owner of the land on which they were raised, as rent, some of it will be paid by the florists to money lenders as interest on the capital in-vested and a part, -- perhaps the largest portion,  will be paid to laborers as wages. The host and his guests are given pleasure by the beauty and perfume of the flowers. The host probably enjoys an enhanced reputation and standing among those whom he wishes to impress with his wealth. It is his money he spends; who shall say that since he makes opportunity for labor as well as providing pleasure for his guests and a reputation for splendid prodigality for himself, that his expenditure is not the best for society he could make?

Let us cast up the account briefly. Suppose that the following sums were received by the producers

Let us suppose that this person instead of spending his money on flowers invested it in an industry, let us say, the shoe or the milling industry, where there was just as great returns to each of the productive classes as in the case of the florists. Then from the side of production there will occur the distribution of the $100,000 just as above. After the evening's ball in the case of the flowers, they have served their purpose. After a week at the most, the last possibility of their pleasing has been exhausted. They are withered and positively ugly. In the case of the shoes or flour produced by the other method of spending the money their usefulness has just begun. Moreover, the shoes increase the economic efficiency of the consumers who bought them. It is possible that the flowers also contribute something to the economic or social efficiency of those who enjoy them. But, as providing socially marginal satisfactions, it is at least doubtful whether they were productive of as much economic or social good to the consumers and to society in general as the flour or the shoes. By socially marginal satisfactions, is meant those which are not only less imperative to the individual users of the goods, but are less necessary to the well being of society considered as a whole, workers and capitalists, consumers of a more fundamentally necessary class of goods as well as consumers of luxuries. As a good which is less necessary to the productivity of an individual than another good may be called a socially unnecessary good to that individual, so a good or class of goods which contributes less than another to the economic efficiency of society as a whole may be socially unnecessary to that group of individuals or classes called society. Luxuries are socially marginal goods when they contribute less to social well-being than necessaries. From the standpoint of society these goods are luxuries which are not so necessary as others to the well-being of society as a whole,  society conceived of as including the working classes as well as the monied classes. So long, therefore, as a class of society is suffering from the want of such goods as will enable that class to increase its efficiency and the well-being of society as a whole, there is no social justification of the consumption of goods which contributes less to the well-being of the whole social group.